Features and Benefits of investing in National Pension Scheme (NPS)

The national pension scheme (NPS) is an instrumental structure introduced by the Indian government to provide pension plan to people of India. This scheme is directly controlled by the Pension fund regulatory and development authority. The NPS is open to all the person who voluntarily want to invest in pension scheme, provided the age is between 18 – 60 years. The minimum investment limit set up by government of India under NPS is Rs 500 per month or Rs 1000 per annum, however there is no upper limit to this scheme laid down by the government of India. Further this scheme provides a tax rebate of maximum Rs 50,000 under this scheme according to income tax act 80CCD (1B). This article only discusses the benefits of the National Pension Scheme, if readers want to know the details of NPS they can read our earlier post about the same (National Pension Scheme (NPS) India – All You Need to Know).

This is a national scheme introduced by the government for the people who looks forward to invest in a retirement plan. According to this scheme the money invested will be further vested in debt or equity market as per the preference of the policy holder. After retirement the policy holder can withdraw 60% of the money and the rest 40% will be invested to purchase annuity. However the matured 60% of the amount is not exempted from tax. The new pension scheme or national pension scheme provides a huge range of choices of investments to select from.

Benefits of NPS

Choose the investment option – here a person gets to opt for the best investment instrument they think is suitable for them like government securities debts equity etc. This scheme comes with the option of automatic, where the funds are reallocated according to the age and expectation.

Opt for pension manager – this scheme gives the flexibility of choosing a different pension fund manager to look after their investments.

Track your new pension scheme with unique number – when a person plan to invest in NPS using PRAN “permanent retirement account number” the scheme provides an unique number to the policy holder, using which they can check the details of their policy portfolio from where ever they wishes to, this number stays the same through out a policy holders life.

A choice of 2 account or more flexibility – this scheme comes with 2 stages planned for the policy holder to provide them more flexibility. The tier 1 plan under this instrument is the account where the policy holder submits his money for the retirement plan. Withdrawl of money from tier 1 is not allowed, as the plan is dedicated in building up a corpus for the policy holders retirement. However the tier 2 account comes with the flexibility of money withdrawal as per the need of the individual. However the existence of tier 2 can only be possible if the policy holder have tier 1 account.

One account to manage throughout career – one of the drawbacks of provident fund like EPF is, like for a job change case for a person if the person travels to another state they have to change their EPF organisation. However this plan provides you the facility to have only one provident fund account which can be managed from anywhere without the hassle of long ques and loads of paper works.

NPS available to non salaried person – this scheme provides the facility of pension plans to the different scales of traders who can build a retirement sum for themselves using this scheme.

Government backed scheme – The NPS is run by PFRDA pension fund regulatory development authority, this body was created under a parliament act. This means that NPS is a highly secure policy and the sum assured will ultimately be availed to the policy holder without any worry.

Tax benefit – Final payout under this scheme can be taken out in 2 ways 33% of the corpus can be withdrawn as a Lump-sum amount and the same is non taxable, however the rest of the amount is taxable. Upto Rs. 50000 is non taxable under section 80CCD(1B) of IT act and above Rs 1.5 Lakh tax exemption is provided under section 80C of the Act. The tax benefit is applicable to both salaried and non salaried individual.

With so many benefits on offering and NPS being run by PFRDA pension fund regulatory development authority, a body was created under a parliament act confiding with so much high security is definitely an investment every person should take into consideration.

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